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How much does US corn dumping cost Mexican farmers?

August 18, 2010

Remember dumping – the rich country farm subsidies that allow them to dump their products in poor countries at artificially cheap prices, thereby wiping out local agriculture? Tim Wise on the Triple Crisis blog has been running the numbers on the impact of NAFTA (US-Canada-Mexico Free Trade Agreement, in force since 1994). He calls it a the ‘controlled experiment’ “because NAFTA liberalized agricultural trade dramatically over a short period of time, Mexico imports most basic grains and meats almost exclusively from the United States, and Mexican farmers grow many of the crops that compete with the imports. In such a case, one can easily see the increase in U.S. exports, the drop in Mexican producer prices, and it is reasonable to assume that the U.S. export price is the reference price for these products in Mexico.”

To find out the damage done by dumping, he estimated the extent to which U.S. export prices to Mexico were below U.S. farmer costs of production (plus transportation and handling), then calculated the extent to which Mexican producer prices were lowered by U.S. dumping, and then estimated how much more Mexican producers would have earned if they had received non-dumping prices – at least high enough to cover U.S. costs of production.

Here’s the conclusion:

“We estimated the nine-year cost (1997-2005) to Mexican producers at $12.8 billion (in 2000 US$), $1.4 billion per year. To put these numbers in context, the annual losses are more than 10% of the value of all Mexican agricultural exports to the United States (including beer, which Mexico, oddly, classifies as its most important agricultural export). The losses from U.S. dumping surpass the total value of Mexico’s annual tomato exports to the United States, widely touted as Mexico’s biggest NAFTA success story in agriculture.

Corn [that’s maize to us Brits] farmers suffered the highest losses. U.S. exports increased 413%, arrived at prices 19% below production costs, and real producer prices in Mexico declined 66%. We estimated losses to Mexican corn farmers of $6.6 billion over the nine-year period, over $700 million per year. These losses amount to $99/hectare per year, a crushing blow to struggling smallholders.”

4 comments

I’m wondering (and if someone can clarify): is Mexico a net importer of grain? What would happen if prices equalise and Mexican farmers do get the chance to sell locally, would it still make a big difference? And how about the Mexican consumer if the trade deal was altered? Will he face a higher or lower rice for his corn?

1. What can be said about the extent of agricultural dumping globally?
Are there any databases, statistics or numbers that may indicate/ give an estimate of the extent of overproduction and dumping,
and the type of products in volume and in value, as well as figures showing the consequences in different developing countries?

2. On the other hand: The newspapers often write about shortages of food and agricultural production capacity. Is it possible to turn / change the production,
away from the overproduction of food that is dumped,
and instead produce goods the world needs more of, such as biofuels?
What are the obstacles to this? Is it:
a) Lack of competitiveness: Are biofuels more expensive than oil for the consumer,
but generate lower revenue for the farmer, compared to other agricultural products? Is it possible to change this by subsidizing biofuels?
b) Inertia / friction in production and in the markets.
c) The lack of global coordination and global governance.

I Would very much appreciate a reply.
All the best
Kaare

Duncan: Hi Kaare, a bit overwhelmed with other work at the moment, but check out the OECD website on ag subsidies. Not aware of any global stats on dumping – anyone know of some?

I am from South Africa, one of the more developed countries in Africa. Here our maize farmers, dairy farmers, sheep farmers, beef farmers suffer the same situation. If WHO wants subsidies scrapped, developing countries have to do so. Try enforcing that on the USA, their teeth fall out – America is a monopolistic world power. They have all the anti-trust laws in their country but do not apply it to themselves as a world power. My conclusion remains – America is the problem whether it is in environmental protection, scrapping subsidies, as lender country with their own interest a priority, or starting wars to fight “international terrorism” it will always be for their own interest and to hell with the rest.

This is a conversational blog written and maintained by Duncan Green, strategic adviser for Oxfam GB and author of ‘From Poverty to Power’. This personal reflection is not intended as a comprehensive statement of Oxfam's agreed policies.